{"id":13159,"date":"2023-11-21T17:13:53","date_gmt":"2023-11-21T17:13:53","guid":{"rendered":"https:\/\/infundpros.com\/business\/germany-freezes-new-budget-spending-after-top-court-ruling\/"},"modified":"2023-11-21T17:13:53","modified_gmt":"2023-11-21T17:13:53","slug":"germany-freezes-new-budget-spending-after-top-court-ruling","status":"publish","type":"post","link":"https:\/\/infundpros.com\/?p=13159","title":{"rendered":"Germany freezes new budget spending after top court ruling"},"content":{"rendered":"<div>\n<p>Stay informed with free updates<\/p>\n<p class=\"article__content-sign-up-topic-description\"><span>Simply sign up to the <!-- -->German economy<!-- --> myFT Digest &#8212; delivered directly to your inbox.<\/span><\/p>\n<p><iframe class=\"article__content-sign-up-iframe close\" scrolling=\"no\" id=\"signUpIframe\" data-prev-url=\"\/register\/in-article-sign-up?ft-content-uuid=7db76385-d2f1-47bb-8b9d-ccf6857ff2b2&amp;concept-id=3152dab4-adeb-472e-b307-b0a2187f0701\"><\/iframe><\/div>\n<div id=\"article-body\">\n<p>Germany has imposed an across-the-board freeze on new spending commitments, in a move that has exposed the depth of the budgetary crisis triggered by last week\u2019s bombshell ruling by the country\u2019s constitutional court.<\/p>\n<p>Officials said the \u20ac8bn in military aid that Germany had pledged to Ukraine in 2024 would be affected by the freeze. <\/p>\n<p>The court blocked a government move to transfer \u20ac60bn of funds originally earmarked for tackling the Covid-19 pandemic to projects designed to modernise the German economy and fight climate change.<\/p>\n<p>Ever since, government ministers have been scrambling to find ways of plugging the \u20ac60bn hole that the ruling has opened up in Germany\u2019s public finances, with the three parties in Chancellor Olaf Scholz\u2019s unruly coalition deeply divided over how to solve the crisis.<\/p>\n<p>The finance ministry has now responded to the court\u2019s ruling by ordering a freeze on most new spending, in a sign of how seriously Scholz\u2019s team is taking the judgment and its implications for government policy.<\/p>\n<p>The freeze was ordered by Werner Gatzer, state secretary at Germany\u2019s finance ministry, in a letter to 17 ministries seen by the Financial Times. In it, he said the constitutional court verdict meant the \u201cwhole situation with the budget must be reassessed\u201d.<\/p>\n<p>Gatzer said that all \u201ccommitment appropriations\u201d for the remainder of the 2023 budget \u201care to be blocked, with immediate effect\u201d. The German parliament and the top court are exempted from the freeze.<\/p>\n<p>A government official stressed that \u201cexisting spending obligations would be honoured \u2014 but we just won\u2019t be taking on any new ones\u201d. She said it wasn\u2019t a \u201cspending freeze\u201d and in exceptional cases, \u201cappropriations can be unblocked\u201d.<\/p>\n<p>A source with knowledge of Germany\u2019s military budget said the freeze could affect several of the defence ministry\u2019s multiyear projects, including the \u20ac8bn it had planned for Ukraine in 2024. \u201cWe are currently checking to see whether these funds can be released,\u201d the person said.<\/p>\n<p>On Tuesday, defence minister Boris Pistorius visited Kyiv and said that immediate funding totalling \u20ac1.3bn would be disbursed. Ukrainian officials recently expressed concerns that uncertainty about continued assistance from European and US allies had put their country\u2019s \u201cmacro-financial stability\u201d at risk.<\/p>\n<p>The focus of the constitutional court\u2019s ruling was the Scholz government\u2019s \u201cclimate and transformation fund\u201d (KTF), an off-budget vehicle used to channel everything from subsidies for semiconductor and battery factories to investments in Germany\u2019s creaking railway network.<\/p>\n<p>Shortly after coming to power in 2021, Scholz\u2019s government decided to allocate \u20ac60bn of unspent coronavirus funds to the KTF, which is one of 29 such vehicles held off the government\u2019s balance sheet, totalling about \u20ac870bn.<\/p>\n<p>One of the largest of these is the \u20ac200bn Economic Stabilisation Fund or WSF. Originally set up during the pandemic, it was repurposed after Russia\u2019s invasion of Ukraine to protect consumers from higher energy costs. It has been used to finance a cap on electricity and gas prices.<\/p>\n<p>Yet the WSF has also fallen victim to the constitutional court\u2019s judgment. In a further letter from Gatzer to the 17 ministries seen by the FT, he said the borrowing authorisations for the WSF \u201ccan, according to the current legal situation, no longer be used\u201d.<\/p>\n<p>He said all spending set out in the WSF\u2019s 2023 budget that had not yet been utilised was to be blocked \u201cwith immediate effect\u201d. A finance ministry official said payments for the gas and electricity cap would not be affected. <\/p>\n<p>Asked about Gatzer\u2019s spending freeze letter, Kevin K\u00fchnert, general secretary of Scholz\u2019s Social Democratic party (SPD), said it didn\u2019t mean the state had stopped spending money. <\/p>\n<p>\u201cIt means we\u2019ve determined that new commitment appropriations \u2014 that is, new spending commitments related to the future \u2014 are not possible for the moment,\u201d K\u00fchnert told public broadcaster ARD. <\/p>\n<p>\u201cAs long as the government hasn\u2019t figured out how [the \u20ac60bn in lost revenue] can be offset, this is normal procedure under the federal budget code,\u201d he added.<\/p>\n<p>Ministers are split over how to respond to the constitutional court\u2019s ruling. Some in the government want to extend a suspension of Germany\u2019s \u201cdebt brake\u201d, which tightly restricts new government borrowing. <\/p>\n<p>But the fiscally hawkish Free Democratic party (FDP), which controls the finance ministry, opposes a further relaxation of that rule, which was paused during the pandemic and the 2022 energy crisis but came back into force this year. <\/p>\n<p>Some in the FDP want the government to slash spending to plug the gap \u2014 an approach that its coalition partners, the SPD and Greens, have rejected. <\/p>\n<p>K\u00fchnert told ARD that the SPD had not been elected to \u201cmake \u20ac60bn of budget cuts with the lawnmower, slash welfare spending, give up on transforming our society and stop supporting companies that are competing internationally and so lose jobs in Germany\u201d.<\/p>\n<\/div>\n<p>Read the full article <a href=\"https:\/\/www.ft.com\/content\/7db76385-d2f1-47bb-8b9d-ccf6857ff2b2\" target=\"_blank\" rel=\"noopener\">here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Stay informed with free updates Simply sign up to the German economy myFT Digest &#8212; delivered directly to your inbox. Germany has&#8230;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[22],"tags":[],"class_list":{"0":"post-13159","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-business"},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v21.3 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Germany freezes new budget spending after top court ruling | inFundPros<\/title>\n<meta name=\"description\" content=\"Stay informed with free updatesSimply sign up to the German economy myFT Digest -- delivered directly to your inbox.Germany has imposed an\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/infundpros.com\/?p=13159\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta 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